CA11 Financial Accounting

Download as pdf or txt
Download as pdf or txt
You are on page 1of 5

CPA FOUNDATION LEVEL

CIFA FOUNDATION LEVEL

FINANCIAL ACCOUNTING

MONDAY: 5 December 2022. Morning Paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your
workings. Do NOT write anything on this paper.

QUESTION ONE
(a) The following balances were extracted from the books of Jiwe Traders for the month of November 2022:
Sh.
Debit balance (1 November 2022)
Sales ledger 5,698,000
Purchases ledger 36,750
Credit balance (1 November 2022)
Sales ledger 141,750
Purchases ledger 2,288,300
Payment to suppliers 4,057,200
Interest charged by creditors on overdue accounts 241,500
Receipts from credit customers 6,223,000
Bad debts written off 130,200
Customers dishonoured cheques 91,350
Interest charged to customers on overdue accounts 336,350
Debt collection expenses charged to debtors 37,800
Credit notes received from suppliers 93,450
Discounts received 498,750
Discounts allowed 733,950
Purchases (including cash purchases of Sh.532,000) 4,669,000
Cash sales 2,163,000
Credit sales 7,238,700
Credit notes issued to customers 262,500
Contra settlement 129,150
Balances as at 30 November 2022:
Purchases ledger (debit) 50,400
Sales ledger (credit) 177,450

Required:
(i) Sales ledger control account for the month ended 30 November 2022. (6 marks)

(ii) Purchases ledger control account for the month ended 30 November 2022. (5 marks)

(b) Ujenzi Enterprises is a small retail firm. The trial balance of the firm failed to agree on 30 June 2022. The
difference was transferred to a suspense account and financial statements prepared. On detailed review of the
books, the following errors were revealed:
1. The purchases daybook had been undercast by Sh.1,200,000.
2. Purchases on credit from Demario Ltd. for Sh.600,000 had been posted to their account as Sh.6,000,000.
3. A purchase of a machine worth Sh.8,400,000 had been posted to repairs of machinery account.
4. A customer returned goods worth Sh.1,200,000. This transaction had been entered in the sales returns
daybook and posted to the debit of the customer’s account.
5. Sh.7,200,000 owed by Jeru Ltd., a customer, had been omitted when drawing up a schedule of debtors
from the ledger.
6. A cash discount of Sh.240,000 had been correctly entered in the cashbook, but has not been posted to
the customer’s account.

CA11 & CF11 Page 1


Out of 5
Required:
(i) Journal entries to correct the above errors. (Narrations not required). (6 marks)

(ii) Suspense account duly balanced (including the opening balance). (3 marks)
(Total: 20 marks)
QUESTION TWO
(a) Explain the following terms as used in company accounts:

(i) Discount on shares. (2 marks)

(ii) Allotment of shares. (2 marks)

(iii) Share premium. (2 marks)

(b) The following information was extracted from the books of Viki Ltd. as at 30 September 2021 and
30 September 2022:

Statement of financial position as at 30 September:


2022 2021
Sh. “000” Sh.“000”
Assets:
Non-current assets:
Land and buildings 540,000 240,000
Motor vehicles 120,000 144,000
Furniture and fittings 96,000 168,000
756,000 552,000
Current assets:
Inventory 96,000 84,000
Accounts receivable 144,000 108,000
Cash and bank 24,000 36,000
264,000 228,000
Total assets 1,020,000 780,000
Equity and liabilities:
Equity:
Ordinary share capital 480,000 360,000
Share premium 180,000 60,000
Retained earnings 156,000 96,000
816,000 516,000
Non-current liabilities:
Long-term loan 120,000 180,000
Current liabilities:
Accounts payable 62,400 48,000
Accruals 12,000 24,000
Proposed dividends 9,600 12,000
84,000 84,000
Total equity and liabilities 1,020,000 780,000

Additional information:
1. Profit after tax for the year ended 30 September 2022 was Sh.84,000,000.
2. Interest expense for the year ended 30 September 2022 charged to the statement of profit or loss was
Sh.12,000,000.
3. All the taxes and interest for the year ended 30 September 2022 were paid. Total tax for the year
ended 30 September 2022 amounted to Sh.48,000,000.
4. Proposed dividends for the year ended 30 September 2022 amounted to Sh.24,000,000.
5. Land and buildings were acquired during the year ended 30 September 2022 at a cost of
Sh.360,000,000.
6. During the year ended 30 September 2022, some motor vehicles which had a net book value of
Sh.60,000,000 were disposed of for Sh.72,000,000.
7. Motor vehicles are depreciated at 10% on reducing balance.

Required:
Statement of cash flows in accordance with the requirements of “International Accounting Standard (IAS) 7,
“Statement of Cash Flows”, for the year ended 30 September 2022. (14 marks)
(Total: 20 marks)

CA11 & CF11 Page 2


Out of 5
QUESTION THREE
Kate, Mercy and Nickson have been trading as partners under the name Komon Partnership. The partners share profits
and losses in the ratio of 4:3:2 respectively. On 1 November 2021, an employee, Oliver, was admitted as a partner. He
was to bring Sh.1,750,000 as capital and Sh.1,680,000 as his share of goodwill. The partners do not intend to open a
goodwill account. The admission of Oliver has not been fully recorded in the books of account other than the cash
record.

The following trial balance was extracted from the books of Komon Partnership as at 31 October 2022:
Sh.“000” Sh.“000”
Capital accounts: Kate 9,500
Mercy 7,500
Nickson 6,000
Current accounts: Kate 4,350
Mercy 2,280
Nickson 3,780
Drawings: Kate 3,500
Mercy 3,000
Nickson 3,200
Oliver 2,500
Land and buildings 11,500
Furniture and fittings (cost) 7,100
Motor vehicles (cost) 10,000
Accounts receivable 3,550
Allowance for depreciation (1 November 2021)
Furniture and fittings 4,100
Motor vehicles 4,350
Accounts payable 3,050
Oliver’s account 3,430
Sales 86,360
Purchases 56,350
Inventory (1 November 2021) 5,460
Salaries and wages 5,000
Advertising expenses 3,580
Motor vehicle expenses 3,980
Insurance expenses 2,400
Office expenses 3,430
Bad debts 1,730
Cash 1,650
Bank 2,210 ______
132,420 132,420
Additional information:
1. The new profit or loss sharing ratio was agreed at 4:3:2:1 for Kate, Mercy, Nickson and Oliver respectively.
2. On 31 October 2022, inventory was valued at Sh.5,780,000.
3. As at 31 October 2022, accrued salaries and wages and accrued advertising expenses amounted to Sh.1,790,000
and Sh.1,680,000 respectively.
4. As at 31 October 2022, prepaid insurance amounted to Sh.660,000.
5. It was further agreed that since Oliver was a former employee, he would be entitled to a salary of Sh.853,000 per
annum with effect from 1 November 2021.
6. The partners resolved that they would receive an interest of 10% per annum on their respective balances of fixed
capital at the beginning of the year.
7. Depreciation is to be provided per annum on cost as follows:
Asset Rate per annum
Furniture and fittings 12%
Motor vehicles 25%

Required:
(a) Statement of profit or loss and appropriation account for the year ended 31 October 2022. (10 marks)

(b) Partners’ current accounts. (4 marks)

(c) Statement of financial position as at 31 October 2022. (6 marks)


(Total: 20 marks)
CA11 & CF11 Page 3
Out of 5
QUESTION FOUR
Blaze Sports Club is a members only club. The club generates income through member subscriptions, bar sales and sale
of sports shoes.

The following information relates to Blaze Sports Club for the year ended 30 September 2022:

Statement of affairs as at 1 October 2021:


Sh.“000”
Assets:
Non-current assets:
Building at cost 15,000
Sports equipment (net book value) 10,500
Current assets:
Cash at bank 18,150
Sports shoes inventory 9,000
Bar inventory 12,000
Prepaid rent (2 months) 3,000
Accrued subscriptions 900
68,550
Liabilities and accumulated fund:
Life membership fund 21,000
Subscriptions in advance 1,800
Accrued insurance (3 months) 2,250
Accumulated fund 43,500
68,550

Receipts and payments account for the year ended 30 September 2022

Receipts Sh.“000” Payments Sh.“000”


Balance brought forward 18,150 Rent (for 12 months) 18,000
Subscriptions received for the year Bar manager’s wages 30,000
ended 30 September: Bar supplies 28,500
- 2021 600 Building repairs 6,750
- 2022 16,500 Purchases of sports equipment 7,500
- 2023 1,200 18 months insurance 13,500
- Life membership 3,000 Purchase of sports shoes 7,500
Sale of sports shoes 13,500
Sale of sports equipment 210
Bar sales 69,900 Balance carried forward 11,310
123,060 123,060

Additional information:
1. The building was constructed by the club and completed on 30 September 2021. It was commissioned on
1 October 2021 and was estimated to have a useful life of 40 years.
2. Life membership subscriptions are brought into income equally over 10 years in a scheme that begun a few
years ago. Since the scheme began, the subscription of Sh.3,000,000 per person has been constant. Prior to the
year ended 30 September 2022, eleven (11) life membership subscriptions had been received.
3. As at 30 September 2022, closing bar inventory was valued at Sh.12,750,000 and Sh.1,200,000 was due to the
bar suppliers.
4. Four annual subscriptions of Sh.300,000 each had been promised relating to the year ended 30 September 2021,
but had not yet been received. Annual subscriptions promised, but not paid, are carried forward for a maximum
of 12 months and written off thereafter.
5. As at 30 September 2022, inventory of sports shoes was valued at Sh.13,500,000 while the sports equipment
had a net book value of Sh.10,500,000. During the year ended 30 September 2022, sports equipment with a net
book value of Sh.200,000 was sold.

Required:
(a) Bar statement of profit or loss for the year ended 30 September 2022. (4 marks)

(b) Income and expenditure statement for the year ended 30 September 2022. (8 marks)

(c) Statement of financial position as at 30 September 2022. (8 marks)


(Total: 20 marks)
CA11 & CF11 Page 4
Out of 5
QUESTION FIVE
(a) Explain the following accounting concepts:
(i) Materiality concept. (2 marks)

(ii) Matching concept. (2 marks)

(b) In the context of manufacturing accounts:

(i) Explain the term “unrealised profit”. (2 marks)

(ii) Describe the treatment of unrealised profits in the books of a manufacturing firm. (2 marks)

(c) Explain the following types of funds in the context of public sector accounting:

(i) Revolving funds. (2 marks)

(ii) Fiduciary funds. (2 marks)

(d) Analyse FOUR objectives of financial statements. (8 marks)


(Total: 20 marks)
................................................................................................................

CA11 & CF11 Page 5


Out of 5

You might also like